Here I wrote why a good public housing system is good for society quoting the uK’s Conservative party in 1951

Housing is the first of the social services. It is also one of the keys to increased productivity. Work, family life, health and education are all undermined by crowded houses.

I also wrote that in S’pore

things started going wrong when HDB flats on 99-year leases became “assets” to be manipulated for political gain (Think “asset enhancement”). The result: “affordable” public housing now means HDB “owners” having to take out mortgages of 25 years. Not a big problem if one buys a BTO flat from the HDB. After paying off the mortgage, there’s 39 years to go before the value of the flat falls over a cliff.

Here’s another problem: The paid-up HDB flat is an example of Hernando de Soto’s “dead capital” at work.

Hernando de Soto is a big name in development economics. He’s a Peruvian economist known for his work on the informal economy and the importance of business and property rights in development.

While S’pore is a developed economy (notwithstanding what the cybernuts say when they post on TRE or Chris K’s FB page), his idea of dead capital and the problems it causes society applies here too.

If I want a loan – to improve my house, or build a business – lenders need collateral. And land or buildings make particularly good collateral because they tend to increase in value, and it’s hard to hide them from creditors.

But the lender needs to be confident it could take the house away from me if I don’t repay the loan. So, I need to prove that the house really is mine. That requires an invisible web of information that the legal system and the banking system can use.

For Hernando de Soto, this invisible web is the difference between my house being an asset – something useful that I own – and being capital – an asset recognised by the financial system.

‘Dead capital’

In poor countries, a lot of assets are informally held. Hernando de Soto calls them “dead capital”, useless for securing a loan. His estimate was that at the start of the 21st Century there was almost $10tn (£7.5tn) worth of dead capital across the developing world – more than $4,000 (£3,200) for every person.

And the PAP administration KPKBs about the need to create an entrepreneurial, risk taking society? Entrepreneurs need funding and banks and other financial institutions need collateral when making risky loans. And property is the best collateral. No collateral, no funding.

26 Responses to “HDB flat: Dead Capital”

Yes, HDB flat owners can’t use their flats as collateral because the flat ultimately belongs to HDB. But so what? The main thing is we can sell our HDB in the secondary market at a profit. Our govt underwrites the value of HDB such that it will never collapse in value. So it is not true HDB is dead capital. For potential entrepreneurs, there are other sources of funding such as peer-to-peer lending and venture capital. In fact, we should be thankful we can’t use HDB as collateral to obtain more loans so that we don’t become more indebted.

(4) “We are not a poor country” is playing fast-and-loose with the facts? The Government is rich with its massive reserves and perennial Budget surpluses but not ordinary Singaporeans having to cope with with high prices with stagnant wages, over-priced public housing and depleted (below CPF Minimum Sum) CPF accounts. Since Singapore is a really a police state, as proven by Amos in US Court (twice) the reserves held by Government do not really belong to Singaporeans. It belongs to the autocratic, self-serving, greedy, incompetent and pro-alien PAP. It uses the reserves to “buy votes” so it can stay in power so it can continue to pay its office holders and top stooges in the civil service million $ salaries.

Ha-ha-ha-ha! CI is sprouting another economic & finance rubbish [a fallacy] to TRE readers. How can HDB flats be dead capital?
It is the high-end private condos that are ‘dead capital’ in today’s property markets. Many are 50% to 60% ‘underwater’ or more succinctly in ‘Negative Equity’ i.e. mortgage sum exceeds the present day market values. Many banks are unwilling to foreclose nor ask owners to ‘top-up’ on high-end ‘underwater’ properties for fear that they may topple the high-end property market.
In fact, if one looks at the Private Non-Landed property market, many are bought with between 60% to 80% mortgage loan quantum leaving very little room for ‘unlocking’ of equity for other purposes. Besides banks these days look at the total amount of loans [Total Debt Servicing Ratio (TDSR)] that you’ve taken up ie. car loans, personal loans, o/d, etc.
For the older &/or fully paid up home owners, how many would want to unlock their property equity values to engage in risky entrepreneurial activities? Many would prefer to keep their house equity intact for retirement & health needs.
There are so many ways to monetize or reap money from your HDB flats:
* You can sell your HDB flat on the open market if you really need money. The HDB resale market is very liquid compared to private properties.
* Retirees can do a ‘HDB Lease Buyback’ if they want to stay in their HDB flat while monetizing their flat’s remaining lease for spending money.
* You can rent out 1 to 2 room(s) for rental income with HDB approval.
* If you can stay with your kids, then rent out entire HDB flats with HDB approval for even better rentals.
The only Dead Capital is CI’s brains!
* If you really need money, downgrade from EA/EM, 5-rm, 4-rm to 3-rm, 2-rm Flexi. [Just watch out for Retirement Minimum Sum]

THE 70% DAFT ARE TOO STUPID TO EVEN BEGIN DISCOVERING that they are stupid to impossibility. They bought wholesale of gullibility and naivety into PAPpys asset enhancement politics SCAM and all deservingly got RAPED of dead capital.

In fact, it is worst than that – more like slave bondage of no return – for most of these DUMBASS.

Why?

The kaisu type – mostly these 70% are the most kiasu ones – leveraged their borrowings (read a*ses) up to the ceiling living the high life – mistaken that life is an endless party and banquet of YOLO (you only live once) party, especially in the last few years of near zero interest rate environment.

They have little savings relative to their debt, hence very little cushion when hard times hit of sudden unemployment or major illness within the family.

And the 30 yr bond market bull run is over, In early 2016, there is negative interest rate in parts of EU, Scandinavia and Japan and US is near ZIRP bottom too. Well, the clock has turned – ALL CENTRAL BANKS from US, ECB, Japan and to a little extent, INTEREST RATE WILL REVERSE in credit tightening.

Now the dumbasses in LEE-jiapore betting big since 2011 peak are in for a rough time of budget pressure even if they don’t lose their job or hit sudden misfortune. Once of this LUCKY LIGHTNING hit in a recession, they will all be battling from drowning.

And if the global economy hit another GFC in the wake of credit tightening, property market will spin for a big drop – the next recovery cycle could take another 12 to 15 years back to peak BUT THOSE TRAPPED will own asset with no gain and living desperately poor BECAUSE THEIR SAVING WIPED OUT IN THE DOWNTURN CYCLE DENIED THEM OF PARTICIPATION IN THE UPTURN.

This is what happened in USA now – economy recovery of jobs, but 1 in 5 live in poverty (despite employed) and their property bought earlier recovered to full value of their purchase costs.

“Government rulings prohibit the remortgaging/refinancing of your fully-paid HDB flat for any additional new cash out loans.”
remember you are not the owner of your HDB flat, even though you have been paying your mortgage through the years.
You are just the leasee, so all this BS about asset enhancement is the PAPIGS idea of making you feel good.
You daft 70% just deserved to be screwed good and proper.

At the end of the day it’s all about greed and very creative advertising.

Greed of the PAP which forces all to use their retirement savings to pay off the shelter over their heads. True, you can downgrade later in life but how much cash would you actually have in hand after paying the loan plus interest back into your CPF account? It’s a case of can see but cannot touch you LL suck thumb also.

Creative advertising when PAP told voters that their HDBs would rise in value (they did) and all would be able to use it as a nest egg for retirement. Good for the seller of the flat but shit for the buyer who has to pay a few hundred thousand for it and a 25 year loan.

And we still do not know if the oldest flats in Toa Payoh and Queenstown have fallen in value as of today. I can’t quite remember any recent news reports on one of these old flats changing hands, perhaps due to their age and design the younger generation does not want to buy them?

MATE, THIS IS FAKE NEWS you are propagating here. Govt underwrites the value of HDB such that it will never collapse in value? Show me the proof of underwriting agreement that it will buy back at the same price it sold to buyers? With which buyer as the counter-party of this underwriting undertaking? I thought Lawrence Wong says it dwindles to zero value at lease expiry.

Ong PC: Yes, HDB flat owners can’t use their flats as collateral because the flat ultimately belongs to HDB. But so what? The main thing is we can sell our HDB in the secondary market at a profit. Our govt underwrites the value of HDB such that it will never collapse in value. So it is not true HDB is dead capital.

What do you offer for collateral for budding entrepreneur? Your backside or what?

Ong PC: For potential entrepreneurs, there are other sources of funding such as peer-to-peer lending and venture capital. In fact, we should be thankful we can’t use HDB as collateral to obtain more loans so that we don’t become more indebted

You mean that even without collateral, peer-to-peer lending and venture capital does not increase your indebtedness? Where do you find so many father Christmas since financial institutions will not lend without collateral?

Lots of money are tied up with the HDB flat. The government should go back to the good old days of the 80s to sell lower cost HDB flat so that dwellers money are not tied up with the government and perhaps the economy can grow better as more people are willing to take more risk to venture into other opportunities. Now many youngsters are screwed with their loans for at least 25 years and they have no choice to venture out but to work their guts out for companies to fulfill their loans and making sure that their family is safe.

My private freehold landed property was fully paid up in 2014 after 20 years and I approached the bank to re-mortgage to get a bank overdraft facility to expand my business just like what my father and many of my friends did. To my horror, the bank told me that MAS disallowed this a few years back and I can only borrow a term loan only. This new ruling is killing off a lot of small businesses. Many small businesses need O/D facilities for short term use and be able to repay the bank and avoid paying interests. Also, O/D allow us to loan anywhere from $1.00 to the limit of the O/D. I don’t understand why a person can get an unsecured O/D at high interest rate and cannot get an O/D facility secured with private property.

My private freehold landed property was fully paid up in 2014 after 20 years and I approached the bank to re-mortgage to get a bank overdraft facility to expand my business just like what my father and many of my friends did. To my horror, the bank told me that MAS disallowed this a few years back and I can only borrow a term loan only. This new ruling is killing off a lot of small businesses. Many small businesses need O/D facilities for short term use and be able to repay the bank and avoid paying interests. Also, O/D allow us to loan anywhere from $1.00 to the limit of the O/D. I don’t understand why a person can get an unsecured O/D at high interest rate and cannot get an O/D facility secured with private property.

Change We Must: Lots of money are tied up with the HDB flat. The government should go back to the good old days of the 80s to sell lower cost HDB flat so that dwellers money are not tied up with the government and perhaps the economy can grow better as more people are willing to take more risk to venture into other opportunities. Now many youngsters are screwed with their loans for at least 25 years and they have no choice to venture out but to work their guts out for companies to fulfill their loans and making sure that their family is safe.

In practical reality – most peasants eat/spend almost as much they earned of income from employment – so the eat-and-shit economy is self-devouring. When so much money is tied in housing which is NOT an asset to the HDB leasor which can be mortgage to banks for investing capital in enterprise, WHERE IS THE CAPITAL FORMATION TO GROW THE ECONOMY?

ZILCH

So among the factors of production – land, labor, capital and technology – labor and land (housing) is USELESS of depletion – capital is zero ( sh*tting as much as its inhabitants are eating) and technology is ZERO (because creative minds must be oppressed to keep/protects PAPpy political hegemony/longevity of dynasty), how can LEE-jiapore survive on any sustainable basis in a competitive globalized world? We survive till now on foreign technology, they are reshoring back to home now.

So what is PAPpys attempting to PRETENTIOUSLY RESUSCITATE this dying economy? Two things -

- bring in more foreigners to eat and sh*t in LEE-jiapore to create a false illusion and mirage of spending and “thriving” economy. Tharman call this politically and economically stupid. Of course, it is stupid to infinity of impossibility. When the economy turns bad, the inhabitants still need to eat-and-sh*t but no income to pay for all those eating-and-sh*tting.

and

- secondly, Kee Chiu told us PAPpys next generation already has this entrenched mindset – NO CHALLENGE to false assumption of a dying economy. There must be no discontinuities forward as if the environment outside is benign & stable (when turbulence is escalating in reality). It is baby step to counter tsunami changes i.e. CONCEALING FAILURES by inactivism to change adaptation. It will preserve PAPpy’s political/money interest.

THANK YOU VERY MUCH FOR THAT INSIGHTFUL EDUCATIONAL REVELATION below – in particular MAS has, in the RECENT PAST, stopped banks from taking landed property as mortgage security for overdraft line to expand your working capital.

private propety: My private freehold landed property was fully paid up in 2014 after 20 years and I approached the bank to re-mortgage to get a bank overdraft facility to expand my business just like what my father and many of my friends did. To my horror, the bank told me that MAS disallowed this a few years back and I can only borrow a term loan only. This new ruling is killing off a lot of small businesses. Many small businesses need O/D facilities for short term use and be able to repay the bank and avoid paying interests. Also, O/D allow us to loan anywhere from $1.00 to the limit of the O/D. I don’t understand why a person can get an unsecured O/D at high interest rate and cannot get an O/D facility secured with private property.

IT CLEARLY TELLS US THAT EVEN MAS knows land is a DEAD CAPITAL with dwindling value if the economy is bad. That is exactly why both landed and non-landed luxury canopy of the housing market has collapsed from its last peak of 2011.

MAS, BY THIS ACTION, tells me that it KNOWS the ASSET ENHANCEMENT POLITICS is an asset bubble-inflated SCAM of transferring wealth from the peasants to the political aristocratic rich/business tycoons. It can’t tell the peasants this because once the bubble bursts, the economy resting on fiction of artificial beauties just crumbles like a sudden collapsed building. SO IT SILENTLY, by moral suasion and hidden from public eye direction to the banks to STOP ACCEPTING land as mortgage security for OD line. OD is just for working capital of financing wages, inventory, warehousing or transportation etc – it is temporary in nature and recallable at moment notice. OD is not long-term START-UP & FIXED PLANT/EQUIPMENT SPENDING in any business as U know.

So @ Ong PC is farting obnoxious political gas with this self-delusion, deception of public mind or his plain ignorance OR ALL OF THE ABOVE.

Ong PC: Yes, HDB flat owners can’t use their flats as collateral because the flat ultimately belongs to HDB. But so what? The main thing is we can sell our HDB in the secondary market at a profit

How can HDB flat be of sustainable transfer value except as a casino chip or monopoly fiction money when you can’t mortgage it for banking credit?

BRILLIANT WRITING – HDB ownership is a FICTION – that is why it cannot be mortgage for banking credit.

The land beneath HDB blocks are collectively owned by HDB purchases. That money received by HDB is remitted to Singapore Land Authority BUT NOTHING IN THE HDB CONTRACT admits to collective ownership of land which is also mostly compulsorily acquired from peasants by the Govt. Like CPF (used to fund HDB purchases) silently back-door taxed by paying peasants below market rate of return, the land owned collectively by HDB peasants also silently disappear into a vacuum of ownership – OF COURSE, NO ONE IN THE WORLD ADMITS TO THIS SILENT THEFT of private property. That is why HDB flats cannot be en bloc.

Money – CPF and LAND under HDB blocks – all stolen is not MERELY DEAD CAPITAL. They are STOLEN CAPITAL in reality of substance.

(4) “We are not a poor country” is playing fast-and-loose with the facts? The Government is rich with its massive reserves and perennial Budget surpluses but not ordinary Singaporeans having to cope with with high prices with stagnant wages, over-priced public housing and depleted (below CPF Minimum Sum) CPF accounts. Since Singapore is a really a police state, as proven by Amos in US Court (twice) the reserves held by Government do not really belong to Singaporeans. It belongs to the autocratic, self-serving, greedy, incompetent and pro-alien PAP. It uses the reserves to “buy votes” so it can stay in power so it can continue to pay its office holders and top stooges in the civil service million $ salaries.

Which is why @ Ong PC, is farting political correct gases with this nonsensical utterance.

Ong PC: Yes, HDB flat owners can’t use their flats as collateral because the flat ultimately belongs to HDB. But so what? The main thing is we can sell our HDB in the secondary market at a profit. Our govt underwrites the value of HDB such that it will never collapse in value. So it is not true HDB is dead capital.

Private Property: My private freehold landed property was fully paid up in 2014 after 20 years and I approached the bank to re-mortgage to get a bank overdraft facility to expand my business just like what my father and many of my friends did. To my horror, the bank told me that MAS disallowed this a few years back and I can only borrow a term loan only. This new ruling is killing off a lot of small businesses. Many small businesses need O/D facilities for short term use and be able to repay the bank and avoid paying interests. Also, O/D allow us to loan anywhere from $1.00 to the limit of the O/D. I don’t understand why a person can get an unsecured O/D at high interest rate and cannot get an O/D facility secured with private property.

Mate! Changes in banking policies (Reduced property-based lending) & the constant revamp of MAS rules on TDSR (Total Debt Servicing Ratio) probably put an end to the traditional borrowing policy of securing property collateral for overdraft facilities.
ONE, methinks that there are too much property-based lending with the local banks – Banks are chock-a-block with non-performing or Zombie property collateral (usually high-end properties) at the moment. For them, property foreclosures, auctions & subsequent hunt for difference between outstanding mortgage & foreclosed value (usually resulting in negative equity in most foreclosed cases) are too much trouble for banks to handle.
TWO, if you looked at S’pore Economic statistics, there are presently too much indebtedness in the S’pore Economy especially with S’pore households. MAS is very concern about this eg. why they came out with the TDSR measure to restrict household indebtedness.
THREE, high NPLs [Non-Performance Loans] especially after the 2014 Oil price collapsed. The recent DBS Bank financial results had seen high levels of NPL provisions (S$815 million) to cover for bad loans from the troubled oil and gas sector.
And lastly, landed private property even freehold status aren’t liquid as the non-landed private ones. Reason is that only S’pore citizens can buy landed property unless yours is at Sentosa Cove. So banks aren’t that fond of landed private property as collateral.
If you look at current bank’s lending practices – they are more inclined to collaborate with property developers in New Launches to sell mortgage products to buyers who are booking a new unit. Why? Banks can book mortgage loan profits on a wholesale basis; at the same time, less effort is required by their staff to market such products re: everything is already pre-planned between the developer & the banks to ensure their interests are…

- Cont’d –
protected!
In addition, the spread between the interbank/deposit rates and the mortgage rates for new property buyers are very, very profitable to the mortgage banks. So much more profitable than traditional vanilla lending products like o/d facilities or even term loans.
Did you guys know that all the mortgage interests are paid upfront by the mortgagers to the mortgage bank at the beginning (probably the 1st 5 years) of the mortgage term. By the end of the 5th year, the mortgage banks have already profited from the new property buyers. And why banks loved to market their property refinancing packages to unwary mortgagers concerned about their mortgage rate – because the whole process repeats itself with refinancing banks creaming off upfront interest payments (from another 5 years) from unwary refinanced mortgage holders thinking that they have ‘saved’ in interest costs by switching mortgage loans to a lower rate. And why financial planners loved to recommend mortgagers to switch & refinance their mortgage loans. The fools get plucked over & over again! Ha-ha-ha-ha!

Loko:
Singapore should drop the price of land, hdb, condo etc. It has made ppl unhappy, even the first family. The papies ministers are a whole shameful lot..

They can’t! – the PAP Ministerial Salaries at the top requires a high & rising land prices to feed their expanding egos. Also, the Property Developers, Construction Industry, Rent-seekers & the Banks all need an escalating property prices to remain highly profitable at the expense of the masses. Basically, everybody in S’pore is LOCKED onto this mechanism & all are screwed – no thanks to your 70% voters!

HDB dwellers are now getting desperate and short-changed. No one complained when they bought 40 years ago. Now as their lease are running out and value depreciating by the day, they started to wake up. HDB is DEAD CAPITAL because you don’t have a say in it. The landlord DOES!

BANKS IN LEE-jiapore MAY NOT GO UNDER, at least not yet for now. All said, MAS disclosed a few years back that roughly 60% of local banks lending exposures are in the real estate sector. No reason to think this ratio has shifted much as property loans are 20 to 25 years’ lifespan duration. Factoring those exposures to troubled industry sectors like marine, retail etc, banks are hamstring of lending capacity to extent more financing to real estate.

Rabble-rouser: methinks that there are too much property-based lending with the local banks – Banks are chock-a-block with non-performing or Zombie property collateral (usually high-end properties) at the moment. For them, property foreclosures, auctions & subsequent hunt for difference between outstanding mortgage & foreclosed value (usually resulting in negative equity in most foreclosed cases) are too much trouble for banks to handle

The foreclosure of high-end properties tells a story – the canopy of real estate have caved-in. The rest below HAS NOT SEEN significant wage rise in the last decade after GFC. So whilst the property market has “recovered”till 2011 and then SINKING AGAIN thereafter, household wealth HAS NOT. In fact, it is gone backward. A lot of mortgage bought after 2011 is underwater. A lot of mortgage bought in 1996 pre-Asian currency crisis peak, took 15 years to recover in 2011 BUT THAT TANKED AGAIN. Are they waiting for another cycle of 15 years to recover (not from now but) from the bottom of CURRENT SINKING DOWNTURN?

Those who rushed in to buy after the recent frenzy of en-bloc thinking that property is on the upturn must be crazy or plain stupid. The property recover since 2017 was DUE SOLELY TO ARTIFICIALLY DEPRESSED lower interest rate BUT THAT CYCLE IS WELL AND TRULY OVER as central banks in all major economies are determined to unwind the flood of global liquidity fueling asset bubbles and share speculations instead of investing. The bond market is nervous.

Rabble-rouser: And yet more buyers are coming into the S’pore residential property market:

That said, the buying could come from Malaysian and Indonesian buyers and local buying for owner-occupation. Like in any asset bubbles, the last innings is rushed in of buying before its collapse.

The macro-picture is highly volatile. Of late, the global bond market is jittery. Commodities price can’t continue the pace of recovery in 2017 into 2018 – otherwise inflation will pick up leading to interest rate hike. Of course, commodities recovery is a big plus for emerging economies – so there appears to be some synchonised recovery of global economy given China’s politically-instigated CYCLICAL rebound this year. Its October economic stats don’t look so strong as prior months.

Just one month ago, Credit Suisse bank was freaky hot on Chinese money in Australian property, now it is FREEZINGLY COLD.

And what about Vancouver?

Reuters :The condominium market has turned red-hot in Vancouver, with agents saying local and offshore buyers are snapping up units that are not yet completed, even as a foreign buyer tax has sent detached home sales plunging.

That is if you bought at the wrong end of the economic cycle, you are cooked for a long long time – exactly the evidence in LEE-jiapore, those who bought at the peak of 1996 waited for 15 years to recover to the nominal price of purchase costs – forget the interest financing costs of that underwater mortgage stuck for 15 years and inflation derision of value of money.

Me thinks that those FOMO idiots who chased property of your mention in this thread could be

- flipping frency or

- who-dare-dies of challenging the devil of global economic cycle – the economy now living on a diet of cheap money that will be removed very shortly. Even central bankers, including MAS boss, Ravi Menon, warned against complacency and they are nervous too.

GD Star Ratingloading...

Member Services

Sponsored Advertisement

Search On TR Emeritus

Sponsored Advertisement

Most Recent Comments

Rabble-rouser: Happy CNY, TRE! – enjoy the festivities while you still can because things are going to get...

opposition dude: Charles underwent some operation some time back didn’t he? Calm down, what goes around comes...

Rabble-rouser: Good CNY article by Uncle Leong reflecting on the issues endemic to S’pore. I’ll only...